Australia is the driest inhabited continent on Earth, and among the world’s highest consumers of water.[4] Amongst OECD nations Australia is ranked fourth-highest in water use per capita.[5] Total water runoff in 2004–05 was estimated at 243 billion cubic meters (BCM) and total groundwater recharge was estimated at 49 BCM, giving a total inflow to Australia’s water resources of 292 BCM. Over 50 per cent of runoff occurred in northern Australia. Only 6 per cent of Australia’s runoff was in the Murray-Darling Basin, where 50 per cent of Australia’s water use occurs. Australia’s total large dam storage capacity was 84 BCM.[6] While surface water is well known, groundwater resources are not well known.

In 2004–05 the National Water Commission undertook water balanca assessments for 55 priority geographic areas across Australia.[7] Of these water management areas six were overused (consumptive use was greater than sustainable yield) and seventeen had a high level of consumptive use as a proportion of inflows (consumptive use greater than 30 per cent of inflows). Two water management areas (Great Artesian Basin and Mereenie Sandstone — Alice Springs) had consumptive use greater than total annual inflow. Total water use in Australia in 2004–05 was nearly 80 BCM, with about 75 per cent of this water returned to the environment following in-stream uses such as hydroelectric power generation. Consumptive use of water in the Australian economy in 2004–05 was 18.8 BCM (6.4 per cent of resources), with the agriculture sector the largest user (65 per cent), followed by household use (11 per cent). Residential water use declined from 243 liter/person/day in 2003 to 191 in 2007.[1]

According to the Prime Minister's office, as the impact of climate change intensifies, Australia faces increasingly acute long-term water shortages with lower rainfall, rivers drying up and dam water levels falling.[8] In most parts of Australia, surface water stored in reservoirs is the main source for municipal water supply, making water supply vulnerable to droughts; only a much smaller share comes from groundwater. Non-conventional water sources, such as seawater desalination, play an increasing role in Australia's water supply, with one desalination plant commissioned to supply Perth and others being built in Sydney, the Gold Coast, Melbourne, Adelaide, and another is planned to be built at Port Augusta.

The use of reclaimed water — the non-potable reuse of treated wastewater for irrigation of green spaces, golf courses, agricultural crops or industrial uses — is common and increasing in Australia. Among the 20 largest water utilities in Australia, the largest volume of recycled water supplied was by SA Water in Adelaide (25,047 ML or 29.6% of sewage collected), while the lowest volume of recycled water was by ACTEW in Canberra (2,104 ML or 7.4% of sewage collected).[2]

The Myponga Reservoir on the Myponga river about 60 km south of Adelaide, supplying about 5 per cent of the city's water supply.

The amount of water required from the River Murray varies from about 40 per cent of Adelaide’s water needs in a normal rainfall year to as much as 90 per cent in a dry year. At full capacity the above-mentioned reservoirs hold about 200 million cubic meters of water, or a little less than 1 year's supply for metropolitan Adelaide.[9]

A desalination plant in Port Stanvac has been approved, which will provide up to one-third of Adelaide's water needs when built in 2012. A smaller plant near Port Augusta has also been proposed, which will supply almost all the residential water needs of towns on the Spencer Gulf.

A severe drought in 2005-2007 triggered major investments, including the Tugun desalination plant and the Western Corridor Recycled Water Project. When rainfall became abundant in 2008-2010 and reservoirs were full, the state government decided in 2010 to put the Tugun plant in stand-by mode, operating at less than 10% of capacity, and to close down a new advanced wastewater treatment plant on Gibson Island in order to save power and chemicals.[12]

Canberra draws its water supply from three separate catchment systems: The Cotter River catchment, within the ACT; the Googong system on the Queanbeyan River in New South Wales; and the Murrumbidgee River, at the Cotter Pump Station.[13] All these rivers drain into the Murray River which is ultimately part of the Murray-Darling Basin.

Some 90% of Melbourne's drinking water comes from uninhabited mountain ash forests high up in the Yarra Ranges east of Melbourne. More than 157,000 hectares has been reserved for the primary purpose of harvesting water. These water supply catchments have been closed to the public for more than 100 years. Melbourne's water supply system is based on the principle that it is better to start with the highest quality source water than having to treat it to reach required standards. According to Melbourne Water, Melbourne is one of only about[weasel words] five cities in the world that has such protected catchments.[14]
Water from the forests flows through streams in reservoirs, which provide security of supply for times of drought. One of these reservoirs is formed by the Thomson Dam on the Thomson River located about 130 km east of Melbourne in Gippsland, from where water flows through a 19 km long tunnel through the Great Dividing Range into the Upper Yarra Reservoir and then onto Silvan Reservoir for distribution as drinking water in Melbourne. In recent years, drought has resulted in depletion of much of the water in the reservoir of the Thomson Dam.

In June 2007, the Victorian State Government announced a new plan to provide water security for Victoria's growing population and economy by diversifying and boosting water supplies, networking the State's water resources in a Victorian Water Grid and enabling a rapid and flexible response to changing future water needs. The plan includes A$4.9 billion of projects to secure Melbourne and Victoria's water supplies for the long term, including:

the 150 billion litre per year, A$2.2 billion Melbourne desalination plant in Wonthaggi which would be the largest desalination plant in Australia, supplying 30% of Melbourne's water needs, for which a Build–operate–transfer (BOT) contract was awarded in mid-2009 to a consortium led by the French multinational SUEZ;

a major irrigation upgrade in the Food Bowl in Northern Victoria to deliver water savings to be shared equally between irrigators, the environment, and Melbourne; and

a major expansion of the Victorian Water Grid with pipelines to connect Melbourne's water system with the desalination plant and Northern irrigation upgrades.

These projects are expected to deliver a 50 per cent boost to Melbourne's water supply within five years and allow water to be moved where it is needed most.[14]

The New Victoria Dam, shown here at 30.6% of capacity, supplies water to Perth.

Perth receives approximately 10% to 20% of its water from a series of reservoirs, 40% from groundwater sources (mostly from the Gnangara groundwater system north of Perth), and 40% from two seawater desalination plants. Perth's climate has dried considerably since the 1970s and average inflows to Perth’s metropolitan dams have dropped to around 60 gigalitres a year on average compared with 340 gigalitres in 1975. In 2006, Perth became the first Australian city to operate a reverse osmosis seawater desalination plant, the Kwinana Desalination Plant, and a second seawater desalination plant began operation in 2013 in Binningup near Bunbury.[15] Together these two plants can deliver 145 gigalitres of water each year. Stage 1 of a Groundwater Replenishment Scheme has commenced, and when fully operational in 2019 it will have the capacity to recharge 28 gigalitres of highly treated wastewater to the groundwater supplies.

The Constitution of the Commonwealth of Australia states that natural resource policy, including that relating to water, is a responsibility of the States: "The Commonwealth shall not, by any law or regulation of trade or commerce, abridge the right of a State or of the residents therein to the reasonable use of the waters of rivers for conservation or irrigation." (Section 100) However, this legal position has become less clear as a result of decisions by the Australian High Court. The Commonwealth Government has taken a much greater role in the Australian water sector in the early 21st century.[16] The Ministry for Climate Change and Water is in charge of water policies at the federal level.

An example of the expanding role of the Commonwealth in the management of water resources is the federal takeover of the Murray-Darling Basin. In April 2007, amid a major drought, John Howard, then Prime Minister of Australia, announced that the region was facing an "unprecedentedly dangerous" water shortage and that water might have to be reserved for "critical urban" water supplies.[17] The Federal Government proposed a A$10 billion Commonwealth take-over of the Murray-Darling Basin, arguing that effective management could not be undertaken by competing state governments. While the states of New South Wales, Queensland and South Australia as well as the Australian Capital Territory accepted the proposal, the state of Victoria initially refused to co-operate, arguing that its irrigators would be disadvantaged and that it would challenge the takeover in the High Court. Legislation to create the Murray-Darling Basin Commission was passed in both the House of Representatives and the Senate in August 2007 in the form of the Water Act of 2007.[18] In March 2008, Premier John Brumby indicated that the Victorian government would participate in the program, in return for $1 billion to upgrade irrigation and continue water security for farmers.[19]

National Water Initiative. In 1994 the Council of Australian Governments (COAG) agreed on a Water Reform Agenda to work towards reform in the water industry at the national level. In 2004, this was succeeded by the formation of the National Water Commission[20] and the adoption of the National Water Initiative (NWI).[21] The NWI "aims at increasing the productivity and efficiency of Australia 's water use and establishing clear pathways to return all water systems – rivers and groundwater – to environmentally sustainable levels of extraction". The government has also established Drinking Water Guidelines as part of a National Water Quality Management Strategy.[16]

State-level regulation. Various state agencies regulate water supply and sanitation in each state, with different arrangements found throughout Australia. State agencies with responsibtilities in the sector include Water Commissions, Environmental Protection Agencies and Competition Authorities. They operate under different Departments (Ministries) such as Natural Resources and Water Departments and Trade Departments. For example, in Queensland under the Water Act 2000 water policy is the responsibility of the Queensland Water Commission, which is under the Department of Natural Resources, Mines and Energy and the Minister of Trade.[22]

At the local level, commercialisation and corporatisation of many Australian urban water businesses has led to management responsibilities being vested in commercial utilities, in contrast to earlier arrangements where services were provided directly by an arm of government. The role of the utility's board members is to provide commercial skill and focus, as well as to buffer the organisation from arbitrary political interference. The private sector is involved primarily through Build-Operate-Transfer (BOT) contracts for major treatment plants, including desalination plants.[16]

The institutional arrangements for service provision vary among States and Territories. In parts of Queensland and in Tasmania, for example, local government is responsible for the provision of water services. In other states and territories, different arrangements have evolved. In New South Wales, Victoria and parts of Queensland, there are separate municipal retail service providers and state bulk service providers that cover large parts of each state. In other states, such as South Australia, Western Australia and the Northern Territories integrated state-level water utilities are in charge of both bulk water supply and retail distribution.

South East Queensland has reformed its water sector in 2008. Under the new structure three state-owned authorities (Seqwater, LinkWater and the SEQ Water Grid Manager) are in charge of bulk water supply:

In Sydney, New South Wales, a catchment authority (Sydney Catchment Authority) has been established to supply water in bulk to the retail water and wastewater utility Sydney Water, a statutory State owned corporation, wholly owned by the New South Wales Government.

In Adelaide, South Australia (SA), water and sanitation services are provided by SA Water. In 1996 the SA Government awarded French-owned United Water a 15-year contract to manage and operate the metropolitan Adelaide water and wastewater systems on behalf of SA Water.[26] SA Water retains ownership of all infrastructure, sets service standards, and implements the government’s pricing policy. SA Water also maintains control of all asset investment decisions, billing and revenue collection.[27] When the contract expired in 2011 SA Water decided not to short-list United Water for the follow-up contract. The South Australian government had accused the company of overcharging.[28] In January 2011 the follow-up operation and maintenance contract with a duration of 6 years, plus another 6 years based on the performance during the first 6 years, was won by Allwater, a consortium consisting of Degremont and Suez Environnement from France as well as the Australian company Transfield Services.[29]

In Canberra, and the Australian Capital Territory generally, a public-private multi-utility partnership (ActewAGL), of which 50% is owned by the state-owned asset-holding company ACTEW, provides services electricity, gas, water and wastewater services since 2000.

Most organisations providing urban water services in Australia have experienced some degree of organisational reform in the 1990s, which has clarified accountabilities by separating policy, regulatory and commercial (operational) functions. The accepted wisdom is that this separation provides urban water businesses with clear commercial goals of customer service, while safeguarding public health and achieving environmental compliance in a sound business operation, free of other conflicting objectives.[16]

For a brief profile of each of the 33 of the largest water companies in Australia see: WSAA Members

The Water Reform Agenda, agreed in 1994, adopted the principle of public consultation by government agencies and service providers when change and/or new initiatives were being contemplated involving water resources. Subsequently, the Australian Drinking Water Guidelines emphasised the right of communities to participate in the development of policies relating to their water supply. The Guidelines also provide advice on how customers should be involved in considering options for effective and acceptable monitoring and reporting on performance of their water supply, and on the frequency of such reporting. The Water Reform Agenda also mentions the need for the public to be informed of the cause and effect relationship between infrastructure performance, standards of service and related costs, with a view to promoting levels of service that represent the best value for money to the community.[16]

In Australia, most water businesses have changed from a charging system based largely on property value to one based on actual water consumed (a user-pays policy), in line with the Water Reform Agenda. Hunter Water in the Newcastle area of New South Wales pioneered this policy in Australia in the 1980s and reported a fall in household water consumption of 30 per cent over previous trends. This experience encouraged other water authorities to adopt the policy with a view to managing demand for water.

However, low-income households in Australia spend in proportional terms much more on utility services than high-income households. The implication is that increases in the price of utility services, if not accompanied by other compensation, will have a regressive and disproportionately negative impact on low-income households. It is generally expected that with the advent of expensive desalination water tariffs will have to increase in Australia.

Across Australia, the average typical annual residential bill for water supply and sewerage services was A$713 in 2007 (US$557 using the January 2007 exchange rate of 1.28).[2] In South East Queensland the average annual water bill of only A$465 in 2005, but that it could increase to A$1,346 by 2017 due to increasing bulk water costs.[30]

In the capital cities alone, over A$2 billion of expenditure was undertaken in 2007/2008 (US$1.74 billion using the January 2008 exchange rate of 1.15). This expenditure is unprecedented in the industry. Urban water utilities invested A$835 million in replacing old and under-performing assets and A$535 million in maintaining asset reliability.[3]

Demand management measures to encourage consumers to use less water include advertising, education, pricing and appliance redesign.[31] Furthermore, the use of alternatives to conventional water supply such as effluent reuse, rainwater harvesting and greywater use are also being encouraged through state-based rebates and the national not-for-profit Smart WaterMark label.[32] Some water businesses in Australia have opted for restrictions on water use to conserve water supplies and minimise capital expenditure. A series of restriction levels, depending on remaining storage capacity in reservoirs, can curb the maximum daily consumption during drought periods. For example, several water authorities in very hot and dry regions of Australia have adopted a cooperative policy with consumers to restrict peak water usage on very hot days or to restrict garden watering to periods in which it is more effective.[16]

When there are droughts in Australia interest in reclaimed effluent options increases. Two major capital cities in Australia, Adelaide and Brisbane, have already committed to adding reclaimed effluent to their dwindling dams. The former has also built a desalination plant to help battle any future water shortages. Brisbane has been seen as a leader in this trend, and other cities and towns will review the Western Corridor Recycled Water Project once completed. Goulbourn, Canberra, Newcastle, and Regional Victoria, Australia are already considering building a reclaimed effluent process.

Indirect potable reuse (IPR) has been considered for regional communities in Goulburn, NSW, the Australian Capital Territory (ACT) and Toowoomba, Queensland. In 2005, residents of Toowoomba rejected the proposal to reuse recycled water as drinking water in Toowoomba Water Futures referendum. The Western Corridor Recycled Water Scheme in South East Queensland was designed and built to produce drinking quality water suitable for release into the Wivenhoe Dam, Brisbane's principal water storage. The advanced WWTP incorporated MF and RO followed by an advanced oxidation system using UV-light and hydrogen peroxide to remove specific disinfection by-products and non-specific low molecular weight organics. The project had a production capacity of 232,000 m3 per day and over 200 km of interconnecting and product water delivery pipelines.[33][34]

In Perth in Western Australia, the Western Australia Water Corporation operated a three-year demonstration project investigating the feasibility of reclaiming water from the Beenyup WWTP using MF, RO and UV disinfection prior to injection into the Leederville aquifer (production of 5,000 m3 per day). The demonstration concluded in 2012, and in 2013 the Western Australian Government agreed to a full-scale groundwater recharge scheme, which commenced construction in 2014. When complete, the full-scale facility will provide 14,000,000 m3 per annum to the aquifers supplying Perth's drinking water, with the option to expand to 28,000,000 m3 per annum in the future.[33][34]

While there are currently no full-scale direct potable reuse schemes operating in Australia, the Australian Antarctic Division is investigating the option of installing a potable reuse scheme at its Davis research base in Antarctica. To enhance the quality of the marine discharge from the Davis WWTP, a number of different, proven technologies have been selected to be used in the future, such as ozonation, UV disinfection, chlorine, as well as UF, activated carbon filtration and RO.[34]

^Stoeckel, Kate; Abrahams, Harry (2007). "Water Reform in Australia:the National Water Initiative and the role of the National Water Commission". In Hussey, Karen; Dovers, Stephen. Managing water for Australia:the social and institutional challenges. Collingwood, Victoria: CSIRO Publishing. p. 8. ISBN978-0-643-09392-8.